Power & Market

Washington's "Suppression" of the Whiskey Rebellion Betrayed the Revolution. And It Failed.

07/30/2020Ryan McMaken

Some conservatives are now bending over backwards to try to justify their calls for more federal intervention in local law enforcement around the nation. This has been problematic for many because some of these people also have pretended to be in favor of decentralization, local control, and a strict reading of the Constitution when it suits them. But now that the actual respect for the Tenth Amendment and the federalism built into the Constitution for the moment favors left-wing protestors and rioters, the Right is now attempting to come up with reasons why the federal government should be called in to solve our problems after all.

I have dealt with some of the claims elsewhere, such as the claim that the federal government can do whatever it wants when there is an "insurrection"—however loosely defined. And some claim the feds can do whatever they want in order to "guarantee a republican form of government."

But for the more unsophisticated participants in this debate, the memo has apparently gone out stating that federal meddling of this sort is fine because George Washington once did it. While I have seen this stated more than once, an example from the Mises Institute's Facebook page, in response to this article, will serve as an example:

The basic "argument" made by "Jack Jackson" here is that since Washington used federal troops against tax protestors in the 1790, then the president today can obviously do the same, and it must all be both perfectly moral and legal.

Yet Washington's invasion of western Pennsylvania was clearly immoral by the standards of the American Revolution, and thus a betrayal of what countless Americans had died for during the war. Not surprisingly, virtually no taxpayer in the backcountry supported Washington's expedition. After all, internal excise taxes imposed by outsiders had been a major cause of the American secessionist cause in the 1770s—what we now call the American Revolution. In other words, Jackson's interlocutor here, a "Robert Davis" is correct. Washington's grandiose ride to abuse and browbeat Pennsylvania farmers into submission was "the beginning of the end" of what most Americans imagined they were signing on for when they submitted to the US Constitution.

Moreover, contrary to what is simply assumed by those whose view of history extends not far beyond conservative talk radio, Washington's "suppression" of the tax rebellion failed. Murray Rothbard explains in detail how the Whiskey "rebels" were the good guys, and how Washington was a bumbling big-government wannabe who later—helped by the ever atrocious Alexander Hamilton—covered up his failure to get his way.

From chapter 44 of Making Economic Sense:

The Official View of the Whiskey Rebellion is that four counties of western Pennsylvania refused to pay an excise tax on whiskey that had been levied by proposal of the Secretary of Treasury Alexander Hamilton in the spring of 1791, as part of his excise tax proposal for federal assumption of the public debts of the several states.

Western Pennsylvanians failed to pay the tax, this view says, until protests, demonstrations, and some roughing up of tax collectors in western Pennsylvania caused President Washington to call up a 13,000-man army in the summer and fall of 1794 to suppress the insurrection. A localized but dramatic challenge to federal tax-levying authority had been met and defeated. The forces of federal law and order were safe.

This Official View turns out to be dead wrong. In the first place, we must realize the depth of hatred of Americans for what was called “internal taxation” (in contrast to an “external tax” such as a tariff). Internal taxes meant that the hated tax man would be in your face and on your property, searching, examining your records and your life, and looting and destroying.

The most hated tax imposed by the British had been the Stamp Tax of 1765, on all internal documents and transactions; if the British had kept this detested tax, the American Revolution would have occurred a decade earlier, and enjoyed far greater support than it eventually received. 

Americans, furthermore, had inherited hatred of the excise tax from the British opposition; for two centuries, excise taxes in Britain, in particular the hated tax on cider, had provoked riots and demonstrations upholding the slogan, “liberty, property, and no excise!” To the average American, the federal government’s assumption of the power to impose excise taxes did not look very different from the levies of the British crown.

The main distortion of the Official View of the Whiskey Rebellion was its alleged confinement to four counties of western Pennsylvania. From recent research, we now know that no one paid the tax on whiskey throughout the American “back-country”; that is, the frontier areas of Maryland, Virginia, North and South Carolina, Georgia, and the entire state of Kentucky.

President Washington and Secretary Hamilton chose to make a fuss about Western Pennsylvania precisely because in that region there was a cadre of wealthy officials who were willing to collect taxes. Such a cadre did not even exist in the other areas of the American frontier; there was no fuss or violence against tax collectors in Kentucky and the rest of the back-country because there was no one willing to be a tax collector.

The whiskey tax was particularly hated in the back-country because whiskey production and distilling were widespread; whiskey was not only a home product for most farmers, it was often used as a money, as a medium of exchange for transactions. Furthermore, in keeping with Hamilton’s program, the tax bore more heavily on the smaller distilleries. As a result, many large distilleries supported the tax as a means of crippling their smaller and more numerous competitors.

Western Pennsylvania, then, was only the tip of the iceberg. The point is that, in all the other back-country areas, the whiskey tax was never paid. Opposition to the federal excise tax program was one of the causes of the emerging Democrat-Republican Party, and of the Jeffersonian “Revolution” of 1800. Indeed, one of the accomplishments of the first Jefferson term as president was to repeal the entire Federalist excise tax program. In Kentucky, whiskey tax delinquents only paid up when it was clear that the tax itself was going to be repealed. 

Rather than the whiskey tax rebellion being localized and swiftly put down, the true story turns out to be very different. The entire American back-country was gripped by a non-violent, civil disobedient refusal to pay the hated tax on whiskey. No local juries could be found to convict tax delinquents. The Whiskey Rebellion was actually widespread and successful, for it eventually forced the federal government to repeal the excise tax.

Except during the War of 1812, the federal government never again dared to impose an internal excise tax, until the North transformed the American Constitution by centralizing the nation during the War Between the States. One of the evil fruits of this war was the permanent federal “sin” tax on liquor and tobacco, to say nothing of the federal income tax, an abomination and a tyranny even more oppressive than an excise.

Why didn’t previous historians know about this widespread non-violent rebellion? Because both sides engaged in an “open conspiracy” to cover up the facts. Obviously, the rebels didn’t want to call a lot of attention to their being in a state of illegality.

Washington, Hamilton, and the Cabinet covered up the extent of the revolution because they didn’t want to advertise the extent of their failure. They knew very well that if they tried to enforce, or send an army into, the rest of the back-country, they would have failed. Kentucky and perhaps the other areas would have seceded from the Union then and there. Both contemporary sides were happy to cover up the truth, and historians fell for the deception.

The Whiskey Rebellion, then, considered properly, was a victory for liberty and property rather than for federal taxation. Perhaps this lesson will inspire a later generation of American taxpayers who are so harried and downtrodden as to make the whiskey or stamp taxes of old seem like Paradise.

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Keep Those Federal Troops out of American Cities

07/30/2020Ryan McMaken

The violence and the utter disregard for basic human rights displayed by the Left in recent years—combined with its support for war crimes when a Democrat is president—have made me inclined to play nice with conservatives these days. At least conservatives aren't planning to torch my neighborhood any time soon, and at the moment they're no worse than the Left on foreign policy.

On the other hand, sometimes even the relatively less bad guys (for now) come to some very dangerous conclusions.

[RELATED: "About Those Spooky Federal Cops in Portland" by Jeff Deist]

Specifically, some authors at conservative publications are now demanding that the president send in federal agents and troops to make arrests and intervene in local law enforcement to pacify rioters in Portland and other American cities. These pundits are claiming that since local officials allegedly aren't responding with sufficient alacrity to rioters, it's time to send in federal troops.

It is questionable that the president has the legal authority to do this. But even if he does have this power—legally speaking—basic commonsense principles of subsidiarity and decentralization inveigh against federal intervention. In other words, a basic respect for the principles behind the Bill of Rights and the Declaration of Independence ought to cause one to reject the notion that it's a good idea to send in federal troops to "solve" the crime problems experienced in American cities.

Here's one example: in an article titled "It's Time to Crush the New Rebellion against Constitution" at Real Clear Politics, author Frank Miele claims "the president is designated as the commander in chief" and therefore "shall be expected to act during a crisis of 'rebellion or invasion' to restore public safety."

Miele addresses two legal questions. The first is whether or not federal troops or agents can act independently when protecting federal property—such as a federal courthouse. The second question is whether or not federal troops can intervene even when no federal property is under threat.

Arguably, in the former case federal agents would be well within their prerogatives to protect federal property as a security guard might do. This, however, does not necessarily empower them to make arrests or assault citizens outside the federal property itself, on the streets of a city well outside the federal compound. The so-called constitutional sheriffs movement—which the Left hates—has it right on this. Local law enforcement ought to be the final authority when it comes to making arrests.

Clearly, however, Miele will not brook such limitations, and he supports the idea that federal troops can intervene "where no federal property is involved."

And what are the limitations on this federal power? Basically, there are none, in Miele's view. So long as we define our adversaries as people fomenting a "rebellion" nothing is off the table. Not surprisingly, Miele strikes a worshipful pose toward Abraham Lincoln's scorched-earth campaign against the Southern states of the US in the 1860s. Those people were "rebels," you see, so the president was right to "tak[e] bold action" even if it meant "skirting the Constitution." Because "there was never any doubt where [Lincoln's] allegiance lay," it was perfectly fine when he abolished the basic legal rights of Americans, such as the right of habeas corpus.

The use of the word "rebellion" is central to understanding the profederal position here. Authors like Miele (and Andrew McCarthy at National Review) have routinely used words like "insurrection" or "rebellion" in order to support their claim the current unrest requires a Lincoln-like response, including a Lincolnesque abolition of half the Bill of Rights.

The Moral Case for Local Control, Made by American Revolutionaries

As a legal matter, of course, I have no doubt that federal judges and supporters of federal meddling could find a way to slice and dice the Constitution so as to make it say whatever they want. As a moral and historical question, however, it is clear that sending in federal troops without an invitation from local leaders is blatantly contrary to the provisions of the Declaration of Independence and is contrary to the Tenth Amendment.

As I explained here, the Declaration lists that the misuse of the executive's (i.e., the king's) troops was a reason for the American rebellion of 1776. These troops must receive the permission of local lawmakers:

The American revolutionaries and those who ratified the US constitution…thought they were creating a political system in which the bulk of land-based military power would rest in the hands of the state governments. Standing armies were to be strenuously opposed, and the Declaration of Independence specifically condemned the king's use of military deployments to enforce English law in the colonies and "to render the Military independent of and superior to the Civil Power." These principles go back at least as far as the English Civil War (1642–51), when opposition to standing armies became widespread.

Thus, any attempt to send in British troops without the approval of the colonial legislatures was an abuse. This same principle was later applied to the state legislatures in relation to federal power.

Sending in federal troops to override local officials is in direct opposition to the moral underpinnings of the American Revolution. But this doesn't stop Miele, who then insists that Article IV of the Constitution authorizes federal invasions because the text says "The United States shall guarantee to every State in this Union a Republican Form of Government." According to Miele, the "republican form of government" here "means government of the people, by the people and for the people—not the mob."

This definition of a republic is something Miele apparently just made up. This is hardly a standard definition of "republic," especially in the eighteenth century—the context most relevant for our purposes here. In those days, "republic" mostly meant "not a monarchy" and something like a decentralized state ruled by a commercial elite.

The idea that the president can send in troops anywhere whenever we decide that a local government is not guaranteeing a "republic"—based on whatever idiosyncratic definition of "republic" we might choose—is dangerous indeed.

In another example, we find authors "Because state and local Democrat officials refuse to restore order, the federal government must….Enough is enough. Those responsible for this new wave of insurrection must face the full force of federal law. "

Note the language about "insurrection"—as if a minuscule clash between some left-wing and right-wing demonstrators in Denver—an example the authors use to justify their position—requires a federal invasion.

Presumably governments are expected to intervene to prevent this sort of thing from happening.

But which government shall do that? It's a safe bet that the authors of the Declaration of Independence would say that a scuffle in Denver clearly lies within the authority of the government in Colorado. After all, the American patriots fought a war—and many died in it—to ensure local control outside the hands of a powerful executive in command of a standing army thousands of miles away.

It is indeed true that the rights of those who wished to see Malkin speak were violated. But here's the thing: the rights of Americans are violated every single day in every city of America. Murders, rapes, thefts, and even gang warfare are not unheard of across this nation, year in and year out. Moreover, the data is clear that police agencies are really quite bad at bringing these criminals to justice.

So, should we call in the feds to solve these problems? There were more than fifty homicides just in the city of Denver last year. There were many more assaults and attempted murders. Doesn't this level of bloodshed constitute a sort of "insurrection" against the decent people of the city? Certainly if we're going to be free and loose with terms like these, as is now apparently the MO of advocates for federal intervention, our conclusion could easily be yes. We might conclude the local police are unwilling to do what it takes to "establish order" and do something about these terrorists and thugs. Will sending in the FBI or the Department of Homeland Security solve this problem?

Fortunately, cooler heads have somehow prevailed, and "sending in the feds" is not a run-of-the-mill policy option. This makes even more sense when we remember that there is zero reason to assume federal cops are better at bringing peace to a city than the state or local officials. These feds are the same people and organizations that have been running a failed and disastrous war on drugs for decades. These are the people who daily spy on law-abiding Americans, in blatant violation of the Bill of Rights. These are the people who were blindsided by 9/11 in spite of decades of receiving fat paychecks to "keep us safe." These are the people (i.e., especially the FBI) who have conspired against Americans in order to unseat a democratically elected president.

Unfortunately, old habits die hard and the myth prevails on both the left and the right that if we're not getting the result we want from politicians, then the answer lies in calling in other politicians from somewhere else to "solve" the problem. But just as it would be contrary to basic notions of self-government and self-determination to call in the UN or the Chinese government to "protect rights" in the United States, the same is true of calling in federal bureaucrats to "fix" the shortcomings and incompetence of state and local bureaucrats. The American revolutionaries created a decentralized, locally controlled polity for a reason. Abolishing federalism to achieve short-term political ends is a reckless way to go.

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Shelton Derangement Syndrome: Which Republicans Will Side with Fed Groupthink?

07/29/2020Tho Bishop

Judy Shelton’s long and bumpy Federal Reserve nomination cleared an important hurdle last week when the Senate Banking Committee voted on party lines to send her for final consideration before the full Senate. Right away, Shelton’s nomination received pushback from the resistance wing of the Republican Party, with Mitt Romney and Lisa Murkowski going on the record as opposing her nomination. With unanimous Democratic objection to Shelton, it would take just two more Republican dissenters to eliminate the most interesting Federal Reserve nominee in recent history.

While it’s easy to simplify the political intrigue as just yet another inner-DC Trump proxy war, the battle over Judy Shelton’s nomination—particularly in the context of the Fed’s actions over the last few months—is very useful as an illustration of our wise senators’ remarkably shallow grasp of monetary policy. It is true that there are reasonable criticisms of some of Shelton’s past work, including her more recent pivot toward a more Trump-friendly championing of an interest rate cut last summer. However, these criticisms seem trite in a world where the Fed is engaging in unprecedented actions, such as buying up corporate junk bonds and utilizing BlackRock to effectively nationalize large parts of America’s financial market.  

It is noteworthy that many of Shelton’s loudest critics have been completely silent on this matter.  

One of the most common critiques waged against Dr. Shelton is that she would be a political loyalist and has questioned the value of Fed political independence. Ignoring the fact that documented American history has shown the notion of “Fed independence” to be a noble myth, I am curious to know what a politicized Fed would look like in practice. After all, the Fed has long tossed aside its traditional policy tools in no small part so that it can accommodate the political decisions made by the legislative and executive branches.  

The proudly independent Jerome Powell had already bent the knee to the White House’s wishes when he failed to follow through with a gradual reduction of the Fed’s balance sheet as stock market turbulence created political headaches. Naturally, there were no cries then from the faux populist Sherrod Brown, who has long been in lockstep with fellow progressives in opposing any sort of monetary tightening. It is unclear whether these alleged working-class champions are intentionally advocating for policy that enriches the billionaire dollar class by boosting financial asset prices, or whether they simply don’t understand the real-world consequences of what they parrot in public hearings.

Among Dr. Shelton’s Republican critics has been Senator John Kennedy of Louisiana, who made the snide comment that “Nobody wants anybody on the Federal Reserve that has a fatal attraction to nutty ideas” following her testimony in February. Unfortunately, that seems to be precisely what we have, with a Federal Reserve engaging in levels of economic intervention beyond anything America has seen. Rather than rail against Jerome Powell’s apparent dedication to turning America into Japan, during the last Senate oversight hearing he asked a few courteous questions of our wise Fed chair and signed off early.  

In Senator Kennedy’s defense, it’s easy to take silly potshots at a public figure who has become something of a pinata to a certain class of Serious People in American financial punditry. It’s much harder to be a critic of America’s central banker at a time of crisis when elected officials are struggling to keep up with daily news. But it is precisely the fact that legislators are utterly ill-equipped to provide serious checks on Federal Reserve “expertise” that someone like Dr. Shelton would be the rare plus to the Fed’s board. 

While it is unlikely that if confirmed Dr. Shelton would masterfully reveal that she is actually the gold bug the media has depicted her as, what is clear is that she would give the Federal Reserve something it desperately needs—ideological diversity. This is also why Very Serious People hate her. Shelton’s willingness to challenge the deified “PhD” standard of modern fiat money and question such sacred cows as Fed independence makes her a potentially dangerous threat to the groupthink that has become far too pervasive in central banks. Dr. Shelton understands the dangers of central banks becoming de facto central planners in modern economies, and she understands the valuable role that gold played in past monetary systems. She reads and respects the ideas of serious heterodox monetary scholars whose perspectives have long been completely ignored within Fed deliberations. She even received her education in places like Portland and Utah, quite a different resume from most of her Ivy League–trained colleagues. 

If confirmed, will Judy Shelton be a revolutionary force within America’s central bank? Almost certainly not. Just as no election will truly drain the swamp in Washington, no Fed nominee is going to restore humility to the Eccles Building.  

Instead, Shelton’s nomination is best seen as a litmus test for Republican senators. Are you interested in actually promoting ideological diversity within American institutions, or are you simply willing to stand with the academic gatekeepers that have given us the Federal Leviathan that we have today? 

We know where Mitt Romney and Susan Collins stand. We shall soon see where the rest of their colleagues fall.

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Why "Sortition" Offers an Alternative to Our Corrupt Ruling Class

As the lockdowns have shown, even well-established democracies are unable to mobilize the judicial and parliamentary tools to ward off the onslaught on liberty. Without means of legal resistance, people have had to accept that the basis of their livelihood has been taken away or at least severely damaged.

Democracy by popular vote provided no guarantee against tyranny. Given the failure of the usual system of democracy by competitive election, it might be time to give "demarchy" a try. There's no reason to assume that it would be any worse than what we have now.

Under a system of demarchy, also called sortition, the people's representatives on the legislative body are selected through lot. Concerning the method, only sortition requires a random mechanism to select a representative sample of the population to serve as the lawgivers.

The problems with the present system of democracy through the election of professional politicians who represent political parties are well known and documented.

As I've explained here at mises.org in the past, this method has a long history.

Critics of demarchy claim that a parliament whose members are selected by chance has less expertise than an elected parliament and that this would increase the power of the bureaucracy. The truth, however, is that the specific knowledge that is now present in the assemblies is in knowing how to gain and to exert power. Nonpolitical competence is missing. Even more so, the current system of party politics has led to a huge bureaucracy and a massive buildup of the power of the state apparatus. The political parties and the bureaucracy cooperate to maximize their power, which they achieve by having more state, not less.

With the public's support to change the structure of the party democracy, the first step would be to complement the present system with an additional chamber. In this chamber—a kind of senate or upper house—members chosen by lot would possess veto rights over the decisions taken by the parliament (Congress) and government (the presidency) including the judiciary (Supreme Court). Such a "fourth power" would be the "voice of the people." Although it is not yet a government and not yet the lawgiver, the senate composed of members chosen by lot has the right to stop the encroachments of government and of the state bureaucracy because of the veto power it holds. 

The next step would be to create a general assembly to serve as the prime lawgiving body. The assembly must be large enough to represent the people. For that purpose, it must comprise persons who are selected randomly from among the constituency. Establishing the general assembly requires a reform of the election laws. In order to achieve this, libertarians must get a majority in the existing parliament (Congress). The final step in the reform of the state structure would be to add a supervisory body and an executive branch of the assembly.

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Mises the Sunny Pessimist

Ludwig von Mises was called several names and epithets in his life, by his admirers and enemies alike. His friends and colleagues dubbed him the “Last Knight of Liberalism,” while his critics called him intransigent, fanatic, and even less flattering epithets.

Just recently I came across another nickname the great Austrian had in the 1920s and 30s: the sunny pessimist. Writing to Bettina Greaves in 1974, Karl Menger, the son of the famous economist, recounts how this came about:

In the years 1927–36, I often met Mises in homes of common friends. In the second half of that period he mad[e] the most terrible predictions. (Once, I was told, a lady after listening to him for half an hour retired and had to be comforted.) All his gloomy prophesies (later surpassed by reality) were uttered with complete equanimity and a constant smile, which earned him the nickname of the sunny pessimist.

It is easy to understand how Mises could be pessimistic in the 1920s and '30s, as Europe was descending rapidly into the hell of socialism. He could explain almost in real time how the policies of the Nazis and the socialists they replaced in power led to the destruction of civilization and the world war. Omnipotent Government from 1944 is perhaps his fullest explanation of the process of the destruction of German civilization, but he saw the same trends in other European countries. Thus, in 1940, in the manuscript that was later published under the title Interventionism: An Economic Analysis, Mises wrote that the Nazis had practically won before they even invaded France; the policies of the western democracies were practically indistinguishable from the National Socialists’, and the French government found it more important to prosecute war profiteers than to ensure adequate provisioning of the French army.

It is more impressive that Mises kept calm and smiling throughout, just like Vera Lynn urged the British soldiers to. Already at the end of the First World War, Mises recounts in his Memoirs (p. 55), he had arrived at the “hopeless pessimism that had long pervaded the best minds of Europe.” Yet his personal philosophy allowed him to escape the apathy such pessimism can lead to. Already as a teenager he had chosen a line from Virgil: tu ne cede malis sed contra audentior ito (do not give in to evil but proceed ever more boldly against it) as his motto. This continued to be his attitude through the darkest days of European history.

Another anecdote recounted by Rudolf J. Klein, one of Mises’s pupils, may substantiate Mises’s prophetic abilities. Writes Klein:

In 1935 he [Mises] came back to Vienna from Geneva for a short visit. I saw him at his old office at the Chamber of Commerce and asked what he thought would be the final outcome of the Hitler regime. He replied (in 1935!), “When one wing of the German army will be at Vladivostock and the other at Gibraltar, the whole thing will break down!”

Aside from the geographic inaccuracies—as is well known, the Germans never invaded Spain and they were stopped at Moscow and Stalingrad, not Vladivostok—Mises’s foresight is eerie. Others, it is true, predicted German aggression throughout the thirties, but those predictions seem based on little more than Teutophobia. Mises, on the contrary, loved German culture, was well read in the German classics and German philosophy, and it pained him deeply to see the destruction of German and European civilization. Yet he understood the inevitable outcome of socialism and autarky: the breakdown of the international division of labor and war.

Mises’s social philosophy is just as relevant today as ninety years ago for understanding the chaos around us. Ideas rule the world, and the real factor supporting the ruling elite is always the dominant ideologies. Just like Mises had to battle the Marxist and non-Marxist socialists who took power across Europe in the first decades of the twentieth century (and in most places hold on to it to this day), so today we are faced with cultural Marxists and progressive mobs. Since there is no way to defeat them in the long run except by exposing their erroneous and antisocial doctrines, and since the “progressive” barbarians may well remain in control for the foreseeable future (and cause untold damage to the economic and spiritual civilization of the West—or what’s left of it), it’s well to keep before us Mises’ personal example. There are reasons enough to be pessimistic, but let us at least be sunny pessimists.

Tu ne cede malis sed contra audentior ito.

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New Unemployment Increased to 1.4 Million Last Week as Recovery Falters

07/25/2020Ryan McMaken

Listen to the Audio Mises Wire version of this article.

New unemployment claims increased during the week of July 18, rising to 1.41 million over the previous week's total of 1.3 million (seasonally adjusted).

Last week was the first week of increasing job losses after sixteen weeks of gradual declines since March. Job losses peaked during the week of March 28 when a stunning 6.8 million workers filed for unemployment benefits.

Since then, weekly totals of newly unemployed had gradually declined until last week's increase.

In total, since mid-March, more than 52 million workers—41 percent of the working age population between 25 and 56 years of age—filed for unemployment benefits.

As of the week of July 11, "continued claims" for unemployment were sought by 16.1 million workers nationwide. Continuing claims had peaked at 24.9 million unemployed during the week of July 4. A decline in continuing unemployment from 24 million to 16 million shows some progress, but a "normal" total for continuing claims in recent years is less than 3 million. Arguably, "excess unemployment" at the moment totals at least 13 million.

The rising unemployment comes partly as a result of state governments forcing the closures of some businesses, or restricting operations, in the name of mandatory social distancing.

Not only has this reduced possible working hours for employees, but it has likely reduced business owners' efforts to expand their businesses due to the extreme uncertainty that accompanies "emergency orders" now issued by governments. These orders are not subject to debate or any meaningful legislative process, making them far more unpredictable than ordinary legislation.

Revenue has declined precipitously for many businesses in recent months.

The approximately 16 million workers who continue to collect unemployment benefits will face a big problem next week as the additional $600 unemployment benefit will run out. CNBC explains:

Tens of millions of Americans who lost their jobs because of the coronavirus pandemic have been able to collect an extra $600 in weekly federal unemployment benefits over the past few months on top of the standard amount given by their state. For many households, the enhanced benefits have been a financial lifeline amidst record job loss and a burgeoning recession.

But on July 31, that enhanced benefit will end — and that could have dire consequences for millions of households.

Political pressure is mounting to continue the benefit, and to pass another stimulus and relief package overall.  Given that tax revenues have collapsed, this will require essentially "printing" the money necessary for an expansion of the "CARES" Act. The US is now on track to produce more than $3 trillion in deficit spending for the 2020 fiscal year, which ends on September 30.

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Murray Rothbard’s Underrated Argument for Self-Ownership

In his noneconomic magnum opus, The Ethics of Liberty (henceforth TEoL), Murray Rothbard outlined what he considered to be the fullest and most complete ethical system of freedom and libertarian natural law. Additionally—at least up until Hans-Hermann Hoppe introduced his argumentation ethics—Rothbard also considered this book to contain the strongest available ethical case for libertarian self-ownership, property, and the nonaggression principle. The most famous and elaborate component of Rothbard’s moral case is his natural law system, which was a renovation of older Scholastic and Thomistic natural law and took up the majority of TEoL’s early chapters. I do not, however, consider his natural law to be Rothbard’s strongest case for liberty, even though he seemed to think it was.

Natural law is very interesting and enlightening, but Rothbard’s real strongest argument is one which I rarely see mentioned (besides Kuznicki’s interesting summary) and which I call the Rothbardian trilemma. Rothbard lays it out almost offhand, to the side of what he seems to think is his primary argument, in chapter 8, “Interpersonal Relations: Ownership and Aggression.” Here is how he introduces it:

Here there are two alternatives: either we may lay down a rule that each man should be permitted (i.e., have the right to) the full ownership of his own body, or we may rule that he may not have such complete ownership. If he does, then we have the libertarian natural law for a free society as treated above. But if he does not, if each man is not entitled to full and 100 percent self-ownership, then what does this imply? It implies either one of two conditions: (1) the "communist" one of Universal and Equal Other-ownership, or (2) Partial Ownership of One Group by Another—a system of rule by one class over another. These are the only logical alternatives to a state of 100 percent self-ownership for all.

Essentially, the argument goes like this: someone must control our bodies, because otherwise we are left in a contradictory state where we can do nothing with ourselves, not even commit suicide, because we would be controlling (or, in the case of suicide, damaging) property that we do not own. Now, if someone must control our bodies, there are three different ways we can arrange that right of control—which is what we call right of ownership—of bodies:

  1. Everyone owns (“the libertarian natural law for a free society”)
  2. Everyone owns everyone else equally (“Universal and Equal Other-ownership,” as Rothbard calls it)
  3. Some (group of) people own others (“Partial Ownership of One Group by Another”)

Only some of these are tenable, as we shall see.

Rothbard next begins to knock down alternatives (2) and (3)—either showing them to be untenable or unethical. First, he deals with (3):

here, one person or group of persons, G, are entitled to own not only themselves but also the remainder of society, R. But, apart from many other problems and difficulties with this kind of system, we cannot here have a universal or natural-law ethic for the human race. We can only have a partial and arbitrary ethic, similar to the view that Hohenzollerns are by nature entitled to rule over non-Hohenzollerns.

Essentially, option (3) fails the universalizability test: if you would choose this option, the burden of proof falls on you to show why some should rule. Ask yourself, what is it about a king or an aristocracy that gives them the right to rule their subjects? The the divine right of kings previously supplied just that sort of justification—yet even that justification fails, because it is an impossible task. Although there are many differences between rulers and subjects, there are none which are ethically relevant.

Next, Rothbard takes (2) out of the running. First, he points out that “if there are more than a very few people in the society, this alternative must break down and reduce to…partial rule by some over others.” This is because, he says, “it is physically impossible for everyone to keep continual tabs on everyone else, and thereby to exercise his equal share of partial ownership over every other man.” It is impossible, in other words, for every man to get permission from every other man before he does what he wants to do: we would all die before that was possible. Moreover, as Rothbard says in the next paragraph, “it is surely absurd to hold that no man is entitled to own himself, and yet to hold that each of these very men is entitled to own a part of all other men!” For, how could they vote on what the other people should do, without exercising unilateral control over their own decision and mouths? If they did not exercise such unilateral control, there would first have to be a vote on how everyone could vote—ad infinitum! In this way, we can see that universal and equal other-ownership is already an impossible situation.

Now, it is possible that such control rights, which Rothbard would call ownership, could be exercised on a “retroactive” basis: essentially, everyone is free to exercise unilateral control over themselves until there are enough votes telling them to do something else to outweigh their partial share in their own bodies—two votes, in the case of equal other-ownership. This would solve the problem of infinite voting regress, but it would likely result in first-come-first-served aristocracy, where whoever can jet around the fastest (along with a buddy) and “command” the most people would own all of those people, including how those people vote. Additionally, this assumes that one needs only a majority of those present, and not a unanimity, to make a decision—an assumption which is in fact contrary to universal equal ownership. All this really devolves back to (3), since those who aren’t around currently don’t get to exercise ownership rights and become slaves of the person with the bigger army unless they bring an army of equal size. Also, this arrangement, where everyone has de facto control over themselves, but a different kind of control over others, which requires not their permission before their “property” is used, but their assertion of a contrary rule, is a double standard which would actually have to be voted for by an equal other-owning collective like the one described above, therefore not actually escaping infinite regress.

There are a few other options which Kuznicki mentions in his article which I would like to address briefly as well, since the natural objection to the Rothbardian trilemma is to attempt to break out of it. First, he muses that “in the real world, people may acquire use rights not only through ownership, but also through lease, rent, borrowing, or other forms of agreement with the owner….it is not necessarily clear that all types of use rights must stem from someone’s ownership somewhere.” My challenge to this, then, is to find just such a moral claim which does not simply regress to option (3) as the use-until-contradiction option I covered above does. This is a claim which would have to be substantiated, because as far as I am aware, partial ownership, no ownership, and whole ownership cover the entire breadth of possible arrangements of control rights. After mentioning briefly a possible theological turn for this, Kuznicki moves on to his final point on the subject: “if we have use rights, but not ownership, many of the same assertions Rothbard later makes will still be valid.” Here I would ask, What is the difference between having use, or control, rights, and having ownership? If I have a right to control every aspect of something, that is identical to full ownership: if someone else tries to control it, that means that for a time I do not have control of it. If I have only partial control rights over something, then I have partial ownership, which is already covered in the trilemma. Hence, we return to option (1): libertarian self-ownership, which reveals itself to be the only option which is both desirable and logically possible.

In conclusion, I find this to be a much stronger case for libertarian self-ownership than any other that I am aware of. It requires, moreover, very little buildup or framework, and makes almost no assumptions, making it ideal for those not already willing to consider libertarianism. In light of this, I am very surprised to find that it is not mentioned all that often. I think that, with some extending and defending, it could even be stronger than argumentation ethics.

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Why the MSM Hates Judy Shelton

07/23/2020Robert Aro

Listen to the Audio Mises Wire version of this article.

Imagine if a member of the Federal Reserve Board of Governors said the following:

When governments manipulate exchange rates to affect currency markets, they undermine the honest efforts of countries that wish to compete fairly in the global marketplace. Supply and demand are distorted by artificial prices conveyed through contrived exchange rates.

Or something honest like:

The Fed should focus on stable money as a key factor in economic performance. Given that central banks today are the world’s biggest currency manipulators, it’s imperative that the next chairman prioritize the integrity of the dollar.

And what if they showed an understanding of both history and sound money principles with something intelligent:

For all the talk of a “rules-based” system for international trade, there are no rules when it comes to ensuring a level monetary playing field. The classical gold standard established an international benchmark for currency values, consistent with free-trade principles.

While she’s not a governor yet, the quotes were from Trump’s appointee Judy Shelton, approved this week by the Senate banking committee on party lines, at a vote of 13–12. To be nominated to the board of directors, Ms. Shelton will now be put forward to be voted on by the full senate, fifty-three of the hundred being Republicans.

Yet below we can see everything wrong with the mainstream media (MSM), mainstream economists, and American politics starting with the New York Times article entitled "God Help Us if Judy Shelton Joins the Fed." Former counselor to the Treasury secretary during the Obama administration Steven Rattner began with:

Trump’s latest unqualified nominee to the Federal Reserve Board must be rejected.

The defaming article shows Mr. Rattner has no care nor understanding of economics. According to him, Ms. Shelton is known for taking “long-discredited positions in the monetary system,” referring to the gold standard, as he claims it was the “culprit in deepening the Great Depression.” Clearly he is no fan of (or perhaps isn’t educated enough to have heard of) Mises or Rothbard.

Mr. Rattner, fueled by ignorance, continues with what some may describe as laudable on Ms. Shelton’s part:

Among other heretical stances, she has supported the abolition of the Federal Reserve itself, putting her in a position to undermine the very institution she is being nominated to serve.

A similar tone was found in the National Review, a magazine which characterizes itself using the highly nebulous and ill-defined “modern conservative movement.” Going back several months, the “controversy” surrounding Judy Shelton was shared in an oxymoronic write-up called: "The Wrong Kind of 'Intellectual Diversity' at the Fed." It is nothing more than a rant showing that the senior editor also knows little about history or economics but, being in a position to publish, does so with a vociferous opinion. He begins with the usual appeal to popularity:

First, she has been a single-minded advocate of a policy that most economists rightly reject: the revival of the gold standard.

What is popular is not always true, especially regarding economics. The article cites quotes from 2009 in the Wall Street Journal in an attempt to discredit Shelton by showing she has not always been consistent in her stances over the past decade. The rant implies that all other members of the Fed and economists have.

Unfortunately, some people claim to like diversity, but not when it’s different from their own bias. The senior editor who wrote the hit piece can be found on Twitter.

Unlike the New York Times and National Review, surprising as it may seem, CNBC’s position was more neutral when discussing the Senate hearing:

She faced persistent and at-times hostile questions about her support for the gold standard, her beliefs on whether bank deposits should be insured and whether the Fed should be independent of political influences.

Last but not least, the Wall Street Journal wrote it best, much to the chagrin of its rivals:

the news write-ups inevitably described her with adjectives like “controversial.” She should take it as a badge of honor, given how she would provide needed intellectual diversity at the Fed.

Only in a world this backward, where in a supposedly free country socialism is considered good and capitalism bad, could Shelton receive so much scorn. To think that one out of seven members of the board could have ideas other than inflationist dogma but would be shunned for speaking up says a lot about the society in which we are living. Perhaps the real reason is that, if appointed, Judy Shelton could be in line for the position of Federal Reserve chair?

Ironically enough, as long Congress stays partisan, we may see Shelton in one of the most powerful central banking positions in the world. It won’t “End the Fed” overnight, but maybe it’s one step closer!

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The Return of Ben and Janet

07/22/2020Robert Aro

With the Fed blackout until next week’s committee meeting, former Fed chairs have been back in the limelight, pushing an agenda not necessarily in the best interest of “We the People.” As explained in an article featured in the New Yorker:

Although neither of them has appeared before a congressional committee since leaving the Fed, they have both emerged in recent months as vocal supporters of using monetary and fiscal policy aggressively to support the stricken economy.

This is no surprise considering that Ben Bernanke championed the “whatever it takes” attitude during the Great Recession, authoring one of the most proinflationist/anticapitalist essays of all time: Deflation – Making Sure “It” Doesn’t Happen Here. As well as calling for money creation, Bernanke and Janet Yellen voiced concerns that the White House’s upcoming spending bill shouldn’t be limited to a trillion dollars, harkening back to their glory days as chair, with the idea that it’s central bankers, not the free market, who bring about ultimate economic prosperity. As reported:

Yellen said it was hard to tell precisely how much financial support might be needed, so it would be unwise to impose a spending cap. Bernanke said, “Whatever it takes is probably what we need to be thinking now.”

The duo's proclamations are not the first during this crisis. Last month they headlined a letter signed by over 150 economists imploring Congress to:

immediately pass a “multifaceted relief bill of a magnitude commensurate with the challenges our economy faces.” 

In the letter they argue that more spending is needed in order to save the economy. They even acknowledge the unprecedented levels of Congress and Federal Reserve support but insist that even more needs to be done! Strikingly, but not surprisingly given the deception and fear tactics required when asking for trillions of dollars, they warn:

Evidence from the Great Recession indicates that a prolonged economic downturn will seriously damage the economic opportunities and wealth accumulation of all Americans, but especially of families of color.

The letter was posted via the Washington Center for Equitable Growth, founded by political insider John Podesta; it’s a nonprofit organization which claims to be “dedicated to advancing evidence-backed ideas and policies that promote strong, stable, and broad-based economic growth.” It implies that the government and Fed support is for the people, especially the disenfranchised. According to the “experts,” intervention in the free market is necessary in order to avoid “prolonged suffering and stunted economic growth.” The option always seems to be that unless some receive bailout money, the poor will suffer. Of course, often the recipients of bailout money are those other than “the poor.”

Under the guise of economic know-how, these prominent people, aided by the mainstream media, convince the world that increasing the money supply to bail some out at the expense of others is a good thing. Unmentioned are the national debt, dollar destruction, and impossible task of allocating new money to those who supposedly “need” it.

That there is no voice testifying before Congress explaining the Austrian business cycle or blaming central bankers for creating the crisis we are in currently is quite concerning. No, “The people” only see two former Fed chairs testifying before Congress, demanding more spending, backed by economists from the most distinguished universities and colleges across the nation, like Harvard, Brown, Stanford, and Berkeley. To the masses, the experts know what’s best and it, of course, seems reasonable to give money to those most in need. Unfortunately, these ideas are not based on sound economic principles, and the disenfranchised groups as well as those on Main Street most likely will not benefit from these recommendations.

Isn’t it fitting that the ones who bring us into crisis are always the ones to bring us out? The Fed’s playbook hasn’t changed much in the last decade, other than in terms of the scope and scale of money being created. Few seem concerned with the anticapitalist policies that got us to this point, nor do they seem capable of understanding that while they claim to fight for equality, central bankers' interventionism and penchant for the printing press bring about an outcome diametrically opposed to the causes they claim to champion.

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Are Austrians Necessarily Anarchists?

Oftentimes, people unfamiliar with the Austrian school tend to bundle it with political anarchism. There are—I believe—different possible explanations for that, but the most prominent ones seem to me the following two. First, it’s true that some Austrians can in effect be considered political anarchists as well. Second, the Austrian school is not only a school of thought about economics, but also (at least) about epistemology and political philosophy—i.e., it’s concerned with issues such as the relationship between individuals and states.

However, all Austrians share a common denominator: they all accept the teachings of Human Action, Mises’s magnum opus. Hence, in order to determine whether Austrianism does necessarily imply political anarchism as well, it might be sensible to scrutinize Human Action: What does it say about the role of state and government in society and how far they can go in subjecting individuals?

Is Unfettered Individual Freedom a Natural Right?

Many anarchists ground their anarchism on the concept of “natural law” or “natural rights”—namely, the idea that something as “natural law” does really exist and that it mandates the inalienability of individual freedom to the government or the sovereign.

However, such a stance entails two logical problems. First, one needs to postulate the existence of enforceable rights which do not coincide with the ones established by law. Second, one needs to compellingly conclude that such rights are objectively in favor of freedom rather than some other ideal—say, equality, tribalism, nationalism, etc.

On the first topic Mises’s answer is straightforward enough: justice exists only insofar as it is established by law. As a matter of fact, he writes,

The notion of justice can logically only be resorted to de lege lata [i.e., the law as it exists]. It makes sense only when approving or disapproving concrete conduct from the point of view of the valid laws of the country….There is no such thing as an absolute notion of justice not referring to a definite system of social organization. (Human Action, [1949] 1998, p. 717, emphasis added)

Moreover, Mises does not only agree on ultimately resorting to laws in order to asses justice, but he goes even further—embracing a viewpoint about freedom and, more generally, human cooperation, rooted in a contractualistic philosophy. In fact, Mises writes,

It is therefore nonsense to rant about an alleged natural and inborn freedom which people are supposed to have enjoyed in the ages preceding the emergence of social bonds. Man was not created free; what freedom he may possess has been given to him by society….Liberty and freedom are the conditions of man within a contractual society. (Human Action, [1949] 1998, p. 280, emphasis added)

On the second topic Mises is manifestly skeptical when it comes to hypothesizing that we can find, or prove, any kind of objectivity about “natural laws”—or about “natural morals” that we can derive cogent “natural laws” from. In fact, he writes that

There is, however, no such thing as natural law and a perennial standard of what is just and what is unjust. Nature is alien to the idea of right and wrong. “Thou shalt not kill is certainly not part of natural law….The notion of right and wrong is a human device. (Human Action, [1949] 1998, p. 716, emphasis added)

Furthermore, Mises goes as far as stating that, were a “natural law” to really exist, it would be sensible to think of it as a ruthless law of abuse and aggression—in accordance with which no social cooperation nor division of labor would be feasible. As we can read,

nature does not generate peace and good will. The characteristic mark of the state of nature is irreconcilable conflict. Each specimen is the rival of all other specimens. The means of subsistence are scarce and do not grant survival to all. The conflicts can never disappear. (Human Action, [1949] 1998, p. 669, emphasis added)

Lastly, Mises clearly lays out his skepticism about “natural rights” as a useful concept when it comes to defending property rights—a fallacious argument that can be refuted, on a priori grounds, by those claiming that “equality” rather than “property” is what “nature” imposes upon human beings. In Mises’s own words,

It is useless to stand upon an alleged natural right of individuals to own property if other people assert that the foremost natural right is that of income equality. Such disputes can never be settled. (Human Action, [1949] 1998, p. 281)

The Right Place for Government

Once the “natural law” argument in favor of anarchism is refuted, we are left with an open question: Is Government useful to human beings? For Mises, the answer is “yes, it is”—but with a few caveats.

Without entering into the details about how detrimental government interventionism is for the economy (part six of Human Action is entirely devoted to it, and Austrians are well aware of the damages caused by currency manipulation, trade barriers, legal monopolies, labor unions, etc.), we cannot deny that Mises conceived of government as something that, taken with a grain of salt, could foster human cooperation and prosperity.

For instance, he writes about taxes and government that

As far as the government fulfills its social functions and the taxes do not exceed the amount required for securing the smooth operation of the government apparatus, they are necessary costs and repay themselves. (Human Action, [1949] 1998, p. 738)

Lastly, Mises’s distrust of natural spontaneous social order and anarchism is clearly set out at the very beginning of part two of Human Action, where we can read:

An anarchistic society would be exposed to the mercy of every individual. Society cannot exist if the majority is not ready to hinder, by the application or threat of violent action, minorities from destroying the social order. This power is vested in the state or government. (Human Action, [1949] 1998, p. 149, emphasis added)

Therefore, we can conclude that Mises accepts indeed a role for governmental intervention, that is, the enactment and the enforcement of the rule of law—whereby “naturally” weak members of society are protected against violence and abuse on the part of stronger ones.

Conclusion

Contrarily to what is often claimed, one can consider him/herself an Austrian disciple even without feeling necessarily compelled to be bundled with political anarchism: Austrian sound teachings about economics do not necessarily imply that no room whatsoever is left for governmental intervention.

Nonetheless, the government's role should be kept to the bare minimum, and its attempts to meddle with resource allocation—via fractional reserve banking, fiat money, legal monopolies, trade barriers, etc.—must be forcefully and explicitly opposed.

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